Being a landlord isn’t always what it’s cracked up to be. While the money can be good, there are no guarantees. And even when the money is flowing, there are a number of other factors that can prove challenging to overcome.
Many landlords make a career out of running rental property investments, while others get run off after just a couple of years. Understanding what it is that causes some landlords to quit will hopefully allow you to avoid a similar fate.
These 5 Issues Frequently Run Landlords Off
It’s hard to say exactly what the life span of landlords is, but the biggest drop-off point would probably be at the two to three-year mark. This is where a large percentage of landlords get frustrated and throw in the towel. But once landlords find a way to battle through this period and stick with it, the ones that remain are likely to hang around for decades.
Assuming you’re interested in enjoying a long and prosperous career as a real estate investor and landlord, here are a few things you can expect to encounter (and will want to avoid).
1. Late Paying Tenants
Few things are more frustrating to a landlord than having a tenant who is late with rent. A rent payment that’s late by a couple of days isn’t a huge deal if it happens once a year, but it does become problematic when it’s 10 days late every single month.
Landlords have to spend a lot of time tracking down late rent checks. Not only does this lead to frustration, but it also takes away time that should be spent on more important responsibilities.
Honestly, the best way to prevent this issue is by enacting more stringent tenant screening practices. While it won’t totally eliminate the risk of late paying tenants, it helps weed out the really bad candidates.
Secondly, find a way to streamline rent payments through an online processor or automatic withdrawal system. Any time you can avoid having tenants mail or drop checks off, you should.
2. Emergencies on Nights and Weekends
Being a 9-to-5 worker often gets a bad rap, but there’s actually a lot to love about this traditional setup. One of the nicest benefits is that you have a predictable schedule. When you get home from work, you don’t have to think about it until the next morning. Plus, you always know you’ll have Saturdays and Sundays off (not to mention holidays and vacation time).
As a landlord, there’s no such thing as a 9-to-5 schedule. You’re on call 24/7/365. Whether it’s a quiet Monday afternoon or 11 p.m. on Christmas Eve, you have to respond when a tenant calls and tells you that the dishwasher is overflowing onto the kitchen floor. You simply don’t have a choice.
People who like predictability and need uninterrupted downtime don’t typically last very long as landlords. This is something to be aware of as you explore your options.
3. Poor Cash Flow
On paper, a property might look like a great investment. The monthly payment (mortgage, insurance, and taxes) is $1,000 and the rent is $1,500. That equals $500 in monthly cash flow, or $6,000 per year. But these simple calculations fail to take into account other things – such as repairs, maintenance, vacancies, property marketing, legal fees, etc.
Many well-intentioned landlords enter into real estate investments with far less of a cushion than they should have. As a result, they get into cash flow problems as soon as something goes wrong. At best, they break even. At worst, they find themselves underwater.
If you’re going to be landlord for any period of time, improve your cash flow management and use conservative numbers whenever you make an investment. This will leave you with more margin for error.
4. Property Damage
One of the risks every landlord faces is property damage. In most cases, this damage is minor and accidental – though it can be serious and malicious. And even if you have a security deposit, trying to make these repairs and fit them into your budget can be a challenge.
“Disputes over normal wear and tear and tenant caused damage can result in legal action,” landlord Allison Bethell writes. “To avoid this, all tenant expectations should be in writing and included in the lease, so the tenant is aware of them. These expectations include things such as who is responsible for cutting the grass, snow removal and common area maintenance.”
The more proactive you are with property damage, the less this issue will plague you. Neglect it at your own peril.
5. Small Issues and Problems
There are plenty of big issues you’ll deal with as a landlord. These may include evictions, falling behind on a mortgage, serious property issues (like a compromised foundation), or any number of other problems. And while these are painful things to deal with, they tend to be few and far between. What trips up most landlords is the litany of smaller issues that never seem to go away.
Whether it’s an AC unit that keeps breaking, a tenant that is continually complaining about the noise coming from the neighbor next door, or the stress of paying bills on time, these small, repetitive issues eventually cause enough stress to push many landlords out of the business. Learning to cope will help you avoid a similar fate.
Let Green Residential Hold Your Hand
You can be a solo landlord for a while, but it’s not a game you want to play on your own for long. In order to stick around for the long haul and enjoy sustained success for a number of years, you have to get help. One of the smartest moves you’ll ever make is to hire a professional property manager to guide you along.
At Green Residential, we take pride in helping Houston-area landlords manage their rental properties through honest, transparent, and cost-effective services that maximize cash flow and lower stress. For additional information on how we can serve you, please give us a call today!